Allstate is still losing money on auto insurance despite rate hikes

Allstate is still losing money on auto insurance despite rate hikes

Through David LaChance

Despite raising interest rates by an average of 8.3% in all 50 states, Allstate continues to lose money on auto insurance, according to its second-quarter underwriting results.

The airline said it paid out nearly $1.08 to cover claims and expenses at its auto business for every dollar in rewards it collected. Even discounting the impact of claims payments from wind and hailstorms, mostly in the Midwest, Allstate paid $1.02 for every premium dollar.

Allstate has lived up to its promise to investors to aggressively pursue rate increases to make its auto insurance business profitable again. The Company reported rate increase implementations totaling $258 million for the month and $601 million for the quarter after implementing rate increases of $862 million and $702 million in the first quarter of 2022 and the fourth quarter of 2021, respectively had turned over millions of dollars.

In a filing with the Securities & Exchange Commission, Allstate said it isn’t finished aiming for higher interest rates. “Allstate continues to make significant increases in insurance rates given the continued inflationary impact on claims severity,” it said.

The airline reported three factors reflecting a “continued increase” in loss costs:

  • Increases in physical damage costs are widespread geographically and reflect higher parts prices, labor costs, and claims processing time.
  • Increases in claims costs reflect more serious auto accidents, increased medical inflation, higher consumption of medical treatment, and more claims with legal representation.
  • Claims reported in 2021 but settled in 2022 were exposed to rising vehicle values, parts prices and labor costs in 2022, contributing to the adverse loss of reserve development.

Crain’s Chicago Business reported that with the increases, the airline’s fares are now above pre-pandemic levels.

The findings come as consumer groups and some state lawmakers pressure auto insurance companies to give back more of windfall profits made during the pandemic, when mileage plummeted.

Earlier this month, the Illinois Department of Insurance released data showing that auto insurers raked in hundreds of millions of dollars in additional profits from their customers in that state, even after offering rebates during the pandemic.

Allstate and the other four largest airlines in Illinois by market share — State Farm, GEICO, and Progressive — charged customers $280 million more than they needed to remain profitable in the year, according to analysis by the Illinois PIRG Education Fund and the Consumer Federation 2019 America (CFA).

That’s after factoring in the $220 million the four insurers cumulatively committed to customer reimbursements in 2020, the two organizations said.

The analysis was based on numbers provided directly by insurers in response to a data call from IDOI, a one-off request prompted by a request from 16 Democratic state senators in January. Although IDOI does not have the power to regulate fares, proponents hoped the release of the data would increase pressure on airlines to give more premium breaks.

More information

Auto insurers’ numbers show they’ve raked in millions in pandemic profits in Illinois

Allstate, GEICO top list of carriers increasing auto insurance premiums


Allstate Canada headquarters in Markham, Ontario, Canada. Allstate Corporation is an American insurance company. (JHVEPhoto/iStock)

Share this:

Leave a Comment

Your email address will not be published.